God(ess(es)), I don’t know why I keep writing this stuff. But somehow it makes me a little less angry with my elected leaders. Venting into the electronic ether provides some cold comfort, I guess.
Let’s review, just for my own sorrow/amusement.
So deregulation – a dismantling of the banking and financial regulations the government put in place after the stock market crash of October 1929 that precipitated the Great Depression – took place in the 1980s under Reagan and the Republicans. Deregulation essentially expanded since then under each administration to one degree or another, as I understand it, with Clinton – a Democrat, mind you – getting in his administration’s two cents/lack of sense in 1998. This was in spite of the savings and loan debacle of the 1980s (remember that, Generation X? No, I didn’t think so).
This in turn lead to all manner of financial investment schemes that became so complex that even the people that are paid to understand them confess that, in the wake of the implosion of said schemes, even they don’t understand these schemes. This is what the much-heralded free market has begat. But at the root of the current disaster is the problem of subprime mortgages and speculation in and selling of said mortgages – and leveraging, I believe is the financial industry term. I gather leveraging is Wall Street code for “in debt up to your freakin’ eyeballs with no clear way of how to pay it off.”
The Foxy Investor Guards the U.S. Hen House
Now Henry Paulson used to be the head of Wall Street investment bank Goldman Sachs until 2006, when Dubya invited him to become the U.S. treasury secretary. Goldman Sachs, along with Morgan Stanley, is essentially one of two Wall Street firms left standing, and the only reason they are standing is because the government let them be recognized as bank holding companies – essentially, they are getting into the commercial bank business, so they can fix their balance sheets with bank account deposits, which they couldn’t do as investment banks. That was one of the results of the regulation that came after the Crash of ’29: delineating between commercial banks and investment banks.
This is what Lehman Brothers wanted to do – even as it sought millions of dollars in golden parachutes for its execs – but the government told it no, and it promptly folded. Goldman and Morgan Stanley would likely have met the same fate, eventually, were they not given this federal lifeline, if the journalists who cover Wall Street are telling it correctly (I certainly couldn’t say for sure).
So, Congress capitulated to the fear mongering that it had to pass this bailout measure or else, promptly handing over $700 billion in taxpayer money to someone — Mr. Henry Paulson — who up until 2006 was directly part of the problem. Goldman Sachs made some tidy sums off of the whole subprime mortgage speculation, with Paulson at the helm.
Does This Make You Angry? It Makes Me Angry
But wait, it gets even better/worse.
Who does Paulson appoint today to oversee the newly-created Troubled Assets Relief Program and U.S. Office of Financial Stability? One of his own: Neel Kashkari, a 35-year-old former Goldman Sachs executive, who came to the U.S. Treasury with Paulson, serving as the assistant treasury secretary for International Economics and Development.
So Congress, in its infinite wisdom and at the insistence of the Bush administration, which has done such a great job low these eight years, watches the financial industry meltdown, and then hands over hundreds of billions of taxpayer dollars to fix it to two people who were part of one of the institutions that caused the problem.
Er, um. What? I still don’t understand how the hell any of this is not anything but bat-shit insane. The world has clearly gone barking mad.
Congress and Dubya hand $700 billion of public money – our money – to people that have literally been part of the problem, and gotten rich off of it too boot. There were dire warnings that if this quick fix didn’t come to pass, everything would continue to go to hell. That if we didn’t rescue (reward) those who combined greed and bad decision making and in the process put a government that is on its own wobbly financial legs on even more precarious financial footing, that things would get immeasurably worse.
So what happened? The market didn’t exactly react as everyone supposedly thought it would; it promptly got worse.
The ripples of the American financial collapse are being felt around the globe, and investors aren’t buying the idea that the bailout is going to fix things. And the same president that warned that we had to do this right away because the industry and the economy is in peril is saying that the economy is “just fine” (really, he said this here in Cincinnati today) but that the recovery will take a long time. And all of the talking heads are telling us that it could be months or even years before credit loosens up – when frozen credit was the boogie man the administration – and the two presidential candidates – used to sell everyone on the bailout.
I had held out hope for a moment that Congress would take its head of out of its collective ass when it refused the bailout the first time, but no. I had hoped that it might actually do something to address the root cause of our current economic crisis, rather than apply a $700-billion bandage that will do nothing to keep the wound from festering and rotting. That our elected leaders might actually do something that resembled leadership.
So what did Congress do once it passed the emergency bailout and a spending bill Friday? It went on recess. The next session of Congress isn’t scheduled to start until November, after the election.
Congress went on vacation.
Those with seats up for re-election have to rush home to do what they can to make sure they get re-elected, of course – never mind the fact that the country is winging its way to financial ruin, if the financial press is to be believed.
So, America burns, and our leaders collectively fiddle. I know, I know; that’s cliché. But it’s apparently an apt one.
Way to go Congress. You too, McCain and Obama. Well played. Two thumbs up. To borrow a phrase from Bush: you’re doin’ a heckuva job. But please remind me: what exactly do we elect you and pay you to do again? I forget. …